Baby Boomers Dominate 2nd Home Market

When I hear the phrase “baby boomers,” a picture forms in my mind’s eye – a picture of large numbers of well-educated people who are nearing retirement age. The number of people born between 1946 and 1964 now comprises the largest generation in U.S. history. They have affected everything from women’s lib and civil rights to glass ceilings and just about everything in between.

I am a baby boomer and a Realtor® so I was not surprised when I recently became aware of some studies by NAR as to the effect baby boomers are having on the housing market, not only nationally but also here in NW Arkansas.

A recent study by National Association of Realtors® (NAR) shows that 80% of baby boomers own their primary residence. The overall rate of home ownership is the United States is only 69%. According to the U.S. Census Bureau, there are 74.6 million owner-occupied homes. That means boomers own almost 60 million of them.

In addition, there are 6.8 million vacation/seasonal/second homes in the U.S. and boomers own 57% of them. Many boomers own more than one. Bella Vista anyone?

Not all boomers plan to make their vacation home their primary residence when they retire, but for those who do, the income tax advantages are very generous. Internal Revenue Service rules state that married homeowners who have lived in their primary residence for at least 2 out of the 5 years ending on the date of sale can exclude up to $500,000 of gain. Unmarried taxpayers can exclude up to $250,000 of gain.

After selling their primary residence, if they then move into their vacation home and make that their primary residence, the same rules apply: live in it for at least 2 out of the 5 years ending on the date of sale and another sizable capital gain can be excluded from taxable income. There is no limit on the number of times this provision of the tax code can be used.

Interest and property taxes on a second home are deductible each year. Add to that the advantage of tax-free capital gains and it’s easy to understand why many boomers will move from home to home. Having such favorable tax advantages can help build a comfortable retirement.

According to National Association of Realtors® study,”Leisure activities of interest to vacation-home owners include beach, lake or water sports, 57 percent; boating, 38 percent; hunting or fishing, 32 percent; golf, 21 percent; biking, hiking or horseback riding, 20 percent; ski or winter recreation, 17 percent; and tennis, 9 percent.” It’s no wonder Northwest Arkansas is so popular!

Boomers are in the midst of their highest-earning years. They realize the benefits property ownership provides. Not only do boomers understand the value of owning property, they understand the value of diversifying their assets.

More than half of all rental property in the United States is currently owned by boomers. Some own only one rental, but a considerable number own five or more properties. And NW Arkansas, despite the recent rise in multi-family prices, still provides good opportunities for investment.

Boomers have also branched out to ownership of commercial property and undeveloped land.

If I can help you find property that may help with your overall plans for home ownership now or in your retirement, please call me. I can help you find investment properties or land as well as a nice retirement home. And if you want to purchase a second home elsewhere, I communicate regularly with agents from all over the country who may be able to help.

For more information:

http://www.irs.gov/publications/p523/ar02.html#d0e1931

http://www.realtor.org/PublicAffairsWeb.nsf/Pages/BabyBoomerStudy06?OpenDocument

http://www.realtor.org/PublicAffairsWeb.nsf/Pages/2ndHomeSurvey06?OpenDocument